Market Structure of the Retail Industry

In the retailing industry, business competition- can either be a pure competition, monopolistic competition, pure monopoly, or become an oligopolistic (Dunne, Lusch & Carver, 2013). Berger (2017) observes that the industry’s competitive environment is changing from a pure competitive to become an oligopoly. Today, there exist larger retailers that have a wide range of products to sell, all under one roof and at reduced prices. The development has negatively affected the growth of smaller retailers such as the malls. Wal-Mart, Target, and Kmart are examples of these larger retailers that are changing the competitive environment to make it harder for new entrants (Zhu, Singh & Manuszak, 2007). An oligopoly is described as the competitive environment that comprises of only few large firms competing against each other unlike in monopolistic competition where many small firms compete (Dunne, et al., 2013). Thus, Wal-Mart is an oligopoly since it competes with Kmart and Target in the discounted retail industry (Berger, 2017).

Wal-Mart’s Pricing Strategy

As Dunne, et al. (2013) argue, Wal-Mart has focused on the pricing strategy to gain a competitive advantage by reducing its product prices by close to 40% from its competitor prices as Target, for example focuses on capitalizing on customers’ positive experience and Kmart concentrates on improving product value. Wal-Mart, Target, and Kmart, sell the same products but Wal-Mart sells them cheaper than the two retailers. Wal-Mart has managed to sustain its pricing strategy with the help of its innovations that has improved its communication systems and technological developments. The continued success of its pricing strategy to attract more customers has enabled Wal-Mart to continue reducing its prices making it become the dominant retailer in the discounted retail industry (Marcilla, 2014).

References

Berger, J. T. (2017). Is retailing becoming an oligopoly? Retrieved< https://www.wiglafjournal.com/corporate/2017/10/is-retailing-becoming-an-oligopoly/>.

Dunne, P. M., Lusch, R. F. & Carver, J. R. (2013). Retailing 8^th ed.: The retail environment. Mason: Cengage Learning.

Marcilla, L. B. (2014). Business analysis for Wal-Mart, a grocery retail chain, and improvement proposals. Retrieved< https://riunet.upv.es/bitstream/handle/10251/44289/Business%20analysis%20for%20Walmart%20FINAL%20TFC%20Laura%20Barber%C3%A1%20Marcilla.pdf?sequence=1>.

Zhu, T., Singh, V. & Manuszak, M. D. (2007). Market structure and competition in the retail discount industry. Journal of Marketing Research, 46(4). Doi:10.1509/jmkr.46.4.453.